Chinese Government Shell Firms Buy Cash-strapped Companies for First Time

Local government shell companies in China bought into struggling privately run listed firms for the first time last year, veering from their typical remit of financing infrastructure projects to pump over $2 billion into cash-strapped businesses, Reuters reported. Local government financing vehicles (LGFVs) acquired controlling or near-dominant stakes in 11 China-listed firms, showed Reuters calculations based on stock exchange filings. They also bought into a handful of small, capital-starved banks. The stimulus comes amid central government calls to aid struggling private-run businesses at a time when economic growth has slowed to its weakest pace in almost 30 years. At the same time, the government has moved to curb LGFV activity to stem financial risk, calling on them to operate independently and banning local authorities from offering them implicit guarantees. Read more